Arbitrage Trading Strategy
This strategy can be described as the simultaneous purchase and sale of an asset in order to profit from discrepancies in its price. Traders will purchase in one market then sell in another with the higher price. Have a look at this example below:
The price of Bitcoin is trading at $5,000 on Coinbase, while at the same time it is trading at $5,100 on Binance. An arbitrage trader can buy Bitcoins on Coinbase and then immediately sell their those on Binance, which will bring trader profit from the differential.
If this strategy is done correctly it will be fairly profitable. To increase the execution time of trades, they can use trading tools such as crypto trading bots. However, the crypto market will become increasingly difficult to exploit price differentials that exist within the market as it always develops.
Fundamental Analysis Strategy
To determine if an asset is undervalued or overvalued, trader who trades based on the fundamentals of an asset will look for certain indicators to apply. For instance, the evaluating metrics such as P/E Ratio, EPS Ratio and ROE are usually used to analyze a company’s share price.
American Investor, Benjamin Graham is the one who first conceived this methodology. Then it was used by Warren Buffet, one of the most successful investors of all time. Fundamental analysis is a concept that is most often applied to companies, but it can just as easily apply to digital assets such as Bitcoin. These metrics can be used as part of any cryptocurrency related fundamentals analysis:
NVT Ratio – Network Value to Transactions Ratio
Crypto-asset value proposition
Quality of the team
The daily volatility of the cryptocurrency market should not concern a trader who applying this strategy because it based on the fundamental value of a digital asset, which means that trader should be looking to hold the asset for more than 10+ years.
Swing Trading Strategy
The crypto market is a volatile market so the price can rise then fall easily within just a few hours. However, some traders use this volatility to try and turn a profit. Swing trading is the strategy which should be used for this purpose.
This strategy should be applied for traders who hold a cryptocurrency over a set period of time, usually a few days or weeks. The traders will have to determine the overall trend of their cryptocurrency holding then trades based on its overall upward or downward trend. Swing strategy is definitely a risky trading strategy because whether or not a trader success, it depends on his/her ability to time the market.
Conclusion
There are many trading strategies that traders can employ to get benefits even when it is difficult to catch up. Whatever the strategy that trader chooses to apply, a trader should acknowledge the risk that comes with trading in this volatility market. And remember to do research before executing any trade.